BENGALURU: Walmart-backed e-commerce giant Flipkart will acquire a 7.8 per cent stake in Aditya Birla Fashion Retail Limited (ABFRL) for Rs 1,500 crore in a move to strengthen its presence in the apparel fashion segment. ABFRL currently owns nearly 3,000 Madura Fashion and Pantaloon stores across the country and exclusive tie-ups with its brands would give Flipkart a leg up on the competition.
The move is being seen as a part of the larger trend of consolidation of the e-commerce and offline sales channels, witnessed post the outbreak of the pandemic.Even though e-commerce still constitutes just around 5 per cent of the overall retail industry in India, the pandemic has accelerated the growth of online marketplaces and impacted the traditional brick-and-mortar sector. Flipkart’s rivals, Amazon and Reliance, are currently locked in a battle over the latter’s proposal to acquire Future Retail for Rs 24,713 crore.
ABFRL told the stock exchanges on Friday that it has issued 7,31,70,732 fully paid-up equity shares to Flipkart, at a price of Rs 205 per share aggregating to Rs 1,500 crore. It also has plans to use this capital to strengthen its balance sheet and accelerate its growth trajectory, as well as scale up in high-growth categories such as innerwear, athleisure, casualwear, and ethnic wear.
“Fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favorable demographics, rising disposable incomes and aspiration for brands. Rapid growth of technology infrastructure will further accelerate this process. Over the years, we have shaped ABFRL into a strong platform to capture future growth opportunities in India.
This partnership is a critical component of that strategy,” Kumar Mangalam Birla, Chairman, Aditya Birla Group said. The partnership will give Flipkart an edge over Amazon in the fashion segment which constitutes 9 per cent of overall e-commerce sales. The e-tailer said that it will strengthen the range of brands offered on its platforms, and deepen its relationship with ABFRL.
“Through this partnership with ABFRL, we will work towards making available a wide range of products for fashion-conscious consumers,” said Kalyan Krishnamurthy, CEO, Flipkart Group, said.
Rs 1,500 crore is the amount Flipkart will pay ABFRL for the stake
9% Share of apparels in retail market
Rs 205 was the price per share